|CPDS Home Contact||Commentary on 'Directions for Health Reform in Australia'|
A National Health and Hospitals Network: A Progressive or Regressive Move?
Re: 'Tough medicine left for another day', The Australian, 4/3/10
I should like to strongly endorse the suggestion in your article that the Federal Government's proposal for A National Health and Hospitals Network is merely addressing part of the health system, and also to submit the the problem goes even deeper than you indicated.
The problem may be even more serious than your article implied, as the proposal does not actually seem to be addressing the main source of problems in the health system (ie improving medical services is arguably not the key to dealing with the potentially budget-crippling rise in health costs).
Moreover the proposal seems likely to exacerbate a primary cause of the pervasive dysfunctions in Australia's federal system of government (ie it would use the imbalance in access to tax revenues to centralize control over many medical services, and thus inhibit their effective linkages with other related functions and increase the risk of locally-inappropriate outcomes).
My reasons for these suggestions are outlined below.
Medical Services: Solving the Wrong Problem?
While I am anything but an expert in the provision of health services, it seems clear that there is an emerging view amongst experts that more / better medical services would only involve dealing with symptoms of problems that lie elsewhere (eg in deteriorating environmental and nutritional quality that contributes the chronic degenerative diseases that were largely unknown to earlier generations, and whose costs are the main factor in blowing out health budgets). Indicators of this problem are documented in The Nature of the Health System in Commentary on 'Directions for Health Reform in Australia' (2006).
One problem with the Health and Hospitals Network proposal is that at best (ie if control by a cost-obsessed federal bureaucracy and political cronies could be contained) the Network would be controlled by clinicians, who (while well placed in relation to medical services) are arguably not experts in the areas where most current emphasis seems to be needed to improve the health system generally. Thus even if the proposed arrangement increases efficiency in the provision of medical services, the proposal leaves unanswered the question of how the non-medical issues (which, if successful, would contain the demand for medical services) are to be addressed.
Centralised Public Administration: the Big Problem
Australia has a federal system of government. Under its original constitution most functions were retained by states, and only a defined set of powers were assigned to the federal government (ie related to then-perceived 'national' issues such as: trade; communications; defence; quarantine; currency; banking and insurance; weights and measures; aliens and foreign corporations; pensions; immigration; external affairs) though involvement in some state functions was allowed where states agreed.
However over the past century control of many other functions has been increasingly centralised (by exploiting the federal government's external affairs power, and by shifting the tax revenues needed to undertake government functions to the federal government).
This has contributed to increasing inefficiency and ineffectiveness in the performance of government functions generally, by distorting state administrations and leading to duplication, overlaps and a 'blame game'. The distortion of state administrations (by enforcing centralised / financially-focused control within state governments, and a political emphasis on lobbying for funding rather than with getting on with the job) has rendered the state governments virtually incapable of performing, or being held democratically accountable for, their nominal functions - see Federal State Fiscal Imbalances (2003).
Centralized planning and control can't work for government functions (either within states or across the federal-state interface) any more than it can work for an economy - because the information needed to make appropriate decisions is too complex and dispersed to be assembled by central planners - see Strategy Development in Business and Government (1997). Centralised planning and control of government functions will inevitably: (a) result in devoting efforts to inappropriate outcomes; (b) break linkages between the function being centralised and other functions - whose effectiveness depended on maintaining strong local relationships; and (c) alienate those whose contribution and commitment is vital to success. [and (d) suppress initiative and innovation (note added later)]
This constraint can be illustrated by the increasing crises the Queensland Government experienced following its adoption of highly centralised strategic planning arrangements in the early 1990s under the Goss administration. For example, a process of budget-linked centralised planning and control was put in place, but:
In order to deal with the many challenges Australia faces, whether in providing infrastructure or other public goods and services, the primary requirement is to build the institutional capacity to address those needs.
Centralization of planning and control both within state administrations and across the federal-state interface is arguably one major obstacle to progress, and the current Federal Government's proposal for centralized control of a National Health and Hospital Network would seem to exacerbate, rather than reduce, this difficulty.
Coordination can be promoted without centralised control by: providing information; promoting collaboration; and encouraging decentralized initiative.
|Addendum A: Making a Bad Situation Worse?||
Addendum A: Making a Bad Situation Worse? CPDS Conclusions
It seems to the present writer (on the basis of observing the evolving debate, and considering 'machinery' issues without claiming any 'health' expertise) that the compromise proposal for changing Australia's health and hospital system adopted through COAG in 2010 could make the past management of these functions look like the 'good old days' in a few years time, because:
In any effort to change a complex system (such as Australia's health and hospital system) there is a contest between new ideas (ie what might be better) and reality (ie what already exists, what else is going on). Making change by imposing reformist ideas (eg by restructuring, or increasing central controls on (say) outputs / outcomes, simply on the basis of reformer's ideas) is likely to generate ongoing dysfunctions - because many complexities in the existing system and emerging issues will be neither recognised nor accommodated. Queensland's experience in the early 1990s demonstrated how the autocratic enforcement of the limited ideas available to inexperienced 'reformers' could actually make a bad situation much worse (see Towards Good Government in Queensland, 1996).
Strategic management (which involves posing strategic questions and requiring existing practitioners to suggest how they should be answered, and then to progressively adjust without strong central controls) is likely to be the most effective means of changing such systems because it mobilizes all necessary information and the commitment of those with the practical knowledge and experience needed for successsful ongoing operations (see Strategy Development in Business and Government, 1997 and Outline of 'Changing the Queensland Public Sector, 1990).
Thus effective reform of Australia's health / hospital system now is most likely to be achieved by a reduction in attempts at fiscally-based central control and supervision by the federal government.
Alternative tactics might involve:
|Addendum B: Others' Views +||
Addendum B: Other's Views
Some observers saw virtues in the types of reforms the federal government proposed.
However it was suggested by many others that practical issues related to the National Health and Hospital Network remain to be answered.
After an agreement was gained with most states in April 2010, there was considerable concern that though it involved significant changes it had not significantly improved the situation.
|Addendum C: Note on 2011 Changes to Reform Proposals||
Note on 2011 Changes to Reform Proposals
In February 2011, the Commonwealth Government obtained the agreement of all states to a revised reform package which involved: (a) states retaining their GST revenues; (b) a 50:50 partnership between states and Commonwealth in a national fund; the provision of substantially more federal government money; and more ambitious targets for hospital service delivery.
However the basis for managing this system remained the payment of 'efficient-prices' for the provision of services . And as noted above, determining appropriate prices is essentially impossible, and attempts to do so have the potential to distort priorities.
Another Bad Health Deal? (email sent 15/2/11)
Re: A blow to state bureaucracy, BusinessSpectator, 14/2/11
May I respectfully suggest that your enthusiasm for the latest national health deal (and your suggestion that similar methods should also be applied to education and public transport) is likely to be misplaced? Your article argued that:
The problem is that it is essentially impossible to determine ‘efficient prices’ that would be reliable as the basis of an activity-based funding model. Thus it is likely that the latest health deal will be as unworkable as the 2010 reform package would have been (see Making a Bad Situation Worse).
Certainly there are inefficiencies in state bureaucracies that need attention. However the best solution would be to address the causes of those problems (eg increasing centralisation, public service politicisation, and naïve efforts to increase efficiency by applying business-like methods to governments’ non-business-like functions). Nothing will be achieved by trying to conceal fundamental weaknesses with a ‘Band-Aid’ (such as activity based funding).
Email response from Professor David
Penington, University of Melbourne
Thank you for your input. I wholeheartedly agree that the 'independent hospital pricing authority' has an impossible task. Presumably it will seek to handle the whole annual budget of the major public hospitals through case-mix funding, regardless of the differing award rates for nurses etc between states, and regardless of the fact that even in Victoria, with the longest experience of activity based funding, this still only covers a portion of the budget of every hospital with other components for various overall functions, which include amortisation of equipment and new equipment purchases.
I can see huge tensions arising, especially from NSW and Q'land, but probably also from WA as the detail comes to be worked out. In any event, there is likely to be a further federal election before the system could begin to run - almost certainly with many further transitional adjustments put in place once politically sensitive disputes break out!
States will inevitably need to have their own bureaucracies double checking everything as they remain responsible for the LHNs as State institutions and for funding the balance of any shortfall from the national body decisions.
I cannot find an email address for Alan Kohler, but fell free to forward this response to him.